Is the EU ready to take on tax havens at home and away for €1 Trillion Prize

With the €1 Trillion the EU governments lose each year to tax dodging at stake. The prospect of a debt ridden jobless future has EU the asking questions. DG TAXUD the tax arm of the EU civil service will prepare a communication by December on the broad topic of tax havens and unfair tax competition.

The UN Represents 192 countries and most of the World population the OECD 34 Countries and only about a fifth the world’s population. No one is saying that the UN is perfect and agencies are more effective that others. However most developing countries want the UN Tax Committee to have more say. Understandablythe rest of the World are increasingly tired of the OECD’s undemocratic dominance of international tax policy. Especially when its transfer pricing standards and the Global Forum process with which it is very closely associated are so ineffective. So many developing countries are calling for the UN Tax Committee to have more power. The Indian Government has made this point clearly in a letter to the OECD .

Not only does the UN Tax Committee have a broader membership in a crucial area it proposes a much more developmentally friendly approach. The UN Tax Commitee supports a source based approach which involves taxing revenues where they are made whereas the OECD favours a residence based approach taxing income where the person or company is based. An ideal method would be a hybrid of the source and residence based approaches but with preference generally applying to source based approaches countries.

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The result of the UN vs OECD standoff could have a bearing on the EU’s upcoming clash with the tax havens. Pundits question the Union’s will to win. The EU wants international cooperation to tackle tax havens outside its shores but entrusts this role to the OECD an organisation that no longer consider there to be any tax havens in existence. Meanwhile The European Council) is blocking an enhanced role for the UN Tax Committee which would bring in many more states, and promotes better solutions to tax dodging.